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Idle-time benefit

Immediately following the declaration of an emergency, the government has appealed to enterprises to avoid hasty decisions on redundancies and promised to draw up a special idle-time regulation.​

On 26 March 2020, the Cabinet revised the previous procedure for supporting specific industries[1] and adopted a new procedure whereby employers of any industry are eligible for idle-time benefit if they are affected by the spread of COVID-19 and certain criteria are met.

Amount of idle-time benefit

The idle-time benefit amount is determined on the basis of information of the State Revenue Service (the SRS) (data reported by employers to the SRS), at 75 % of average monthly gross salary for the six-month period preceding the declaration of the emergency situation or based on actual employee data reported for the respective six-month period but in no case more than 700 euro for a calendar month.

Idle-time duration

Idle-time benefit is introduced for the period from 14 March 2020 to 14 May 2020 but no longer than the duration of the decision declaring the emergency.

Who is eligible?

Employers whose operating revenue has dropped by at least 30 per cent against March 2019, which means that newly established undertakings do not qualify for the benefit.

In addition, enterprises whose operating revenue has dropped by at least 20 per cent against March 2019 may apply for idle-time benefit if:

their export sales for 2019 form 10 % of total sales or are not less than 500,000 euro;

the average monthly gross salary paid in 2019 is at least 800 euro;

long-term investments in property, plant and equipment as at 31 December 2019 are at least 500,000 euro.

Important!

An application addressed to the SRS must provide grounds for the idle time of an employee due to circumstances caused by the employer affected by the crisis and idle-time duration. The SRS will refuse the benefit if, having analysed the employer’s application, it is established that the idle time of the employee is not caused by the crisis situation.

The application must be accompanied by an employer’s certification that the relevant employee will not be dismissed by the employer within one month after the date of submission of the application and the employee is not incapable for work.

The Cabinet Regulation also specifies instances when employers do not qualify for idle-time benefit. Most of these instances concern compliance with respect to the SRS, including tax and reporting compliance, which means that only employers following best practices will enjoy the state support.

Idle-time benefit is not granted:

to employers who have not submitted to the SRS the complete set of tax returns and annual reports for the 12-month period preceding the emergency situation;

to employers whose outstanding tax liabilities as at 7 March 2020 exceeded 150 euro and there is no tax payment extension or voluntary tax payment agreement;

if the employer is or has been, during the last two years, struck off SRS’s Value Added Tax Payer Register or employer’s operations are or have been suspended;

if the employer has insolvency proceedings in progress at the date of the decision;

if the employer has calculated taxes administered by the SRS of less than 200 euro per month on average during the six-month period preceding the declaration of the emergency;

if the employer has failed to provide to the SRS grounds for the idle time of an employee due to circumstances caused by the employer affected by the crisis;

if the employment relationship with an employee has been started after 1 March 2020;

to members of the employer’s board and council;

for calendar days covered by sickness benefits;

to employees who are simultaneously employed by state or municipal authorities or undertakings, paid old-age, retirement or disability pension or carry out an economic activity;

to employees of institutions financed from the state and municipal budget and of undertakings under their control;

to employers whose staff is leased to other taxpayers;

if, during the previous three years and at the time of assessment of the application, a tax audit or data conformity check has resulted in extra amounts to be paid by the employer into the state budget or reduction of an unreasonably large tax amount to be refunded to the employer from the state budget, including late payment fees and penalties, which in total exceed three per cent of the employer’s tax revenue for the respective year administered by the SRS (payments made by the employer less refunds of overpaid amounts made by the tax administration) but, at the time of the assessment, three per cent of the employer’s tax revenue for the previous year administered by the SRS (payments made by the employer less refunds of overpaid amounts made by the tax administration);

if, during the previous year and at the time of assessment of the application, the employer or a member of the employer’s board has been punished for an offence relating to employer’s tax liabilities, customs offences or breaches of labour legislation, except where an individual offence has led to a warning or monetary penalty of less than 151 euro, with the total penalty amount below 500 euro for a year.

The first two criteria (tax and reporting compliance) will not be applied by the SRS to crisis-affected employers who are admitted to the in-depth cooperation programme according to Cabinet Regulation No 748 of 27 November 2018 on the Functioning of the In-depth Cooperation Programme.

Application deadline – 25 April

To apply for idle-time benefit, employers must submit a relevant application using the model form via SRS’s Electronic Declaration System by 25 April 2020 for the period from 14 March 2020 to 31 March 2020 and subsequently by the 25th day of the next month.

The application must provide identifying employee and employer information and grounds for the idle-time of a relevant employee due to circumstances caused by the employer affected by the crisis. Moreover, no sickness benefits will be paid for periods covered by idle-time benefits.

During the COVID-19 crisis, many undertakings are forced to take difficult decisions and decide on actions to be taken in the nearest future, affecting both an undertaking’s growth prospects and employee interests. Considering provisions of the Labour Law regarding the termination of employment relationships and support by means of idle-time benefit, it is our recommendation that any potential solutions should be evaluated carefully before final decisions are made. BDO Law team advises undertakings about labour law, including the process of applying for idle-time benefits.

[1] Cabinet Regulation No 152 of 24 March 2020 on Idle-Time Benefit to Employees Affected by the Spread of Covid-19. Published in the official gazette Latvijas Vēstnesis, 25 March 2020, No 60A https://www.vestnesis.lv/op/2020/60A.2